The key to understanding Putin's foreign
policy is not to dwell on foreign policy concepts or philosophies
but to look at his domestic economic and political agenda. Putin is
seeking to recreate Russian national strength after years of what
he believes to have been stagnation and decay. In his mind there is
a direct connection between creating domestic order and
strengthening the Russian state and increasing international
respect for Russia abroad. He sees foreign policy as a way not only
to raise revenues for the state and his political allies (through
arms sales and special commercial relations with China, India and
Iran) but also to increase respect for the state among the Russians
themselves. In this way, he uses foreign policy to shore up his
drive for domestic political and economic order.

With this goal in mind, we see four pillars
to Putin's foreign policy:

Pillar #1: Expand the
Russian sphere of influence in the "near abroad" and create a
common market in the countries of the former Soviet
Union
Putin's efforts to recreate a Russian sphere of influence in the
CIS are partly economic (to secure oil and other revenues); partly
geopolitical (to enhance political control over neighbors and
secure a buffer security zone against Islamic extremism in the
South); and partly domestic politics (to enhance his popularity and
to quiet communists and nationalists).

Since 1992, Russia has supported "hot spots" and de-facto
independent quasi-states in several areas where they can be used to
pressure sovereign governments: Trans-Dniester/Moldova;
Abkhazia/Georgia; Karabakh/Azerbaijan; Tajikistan-Islamic
radicals/Uzbekistan. This policy, primarily driven by the Ministry
of Defense, remains in place today. However, a new policy, which
combines economics and security and involves Russian companies
purchasing the vital economic infrastructure (power grids; power
generators; oil and gas pipelines) of countries in the "near
abroad," has emerged since 2000. Combined with occasional stoppages
of electricity for non-payment of energy debts, the policy drives
home a clear message to the NIS leaders about Moscow's power. In
addition, Russia will step up work on CIS military cooperation, as
the recent meeting in Yerevan, Armenia, demonstrated, and economic
cooperation, as proclaimed at the
May 31 summit in Minsk.

Russia views radical Islam as a long-term,
systemic threat to its security. It is concerned about the
indigenous Islamic fundamentalists who may threaten regimes in
Uzbekistan and other Central Asian republics. Local Islamic
fundamentalists have close political, military and commercial
(opium/heroin) ties to the Taliban. In the long term, Russia
believes that if Islamists are not stopped in the Northern Caucasus
and Central Asia, they may emerge as a threat on the shores of the
Volga.

Russia has asked the President of
Turkmenistan, Saparmurad Niyazov (nicknamed Turkmenbashi) to supply
natural gas to Ukraine as a token of good will to President Kuchma.
However, Russia is concerned about close ties between Turkmenbashi
and the Taliban, and we were told that Russia is drawing up
contingency plans to intervene in natural gas-rich Turkmenistan if
the Taliban invades.

Russia is concerned about the desperate
economic situation in Kyrgyzstan (which borders China's unstable
Xinkiang province populated by Moslem Uygurs and which experienced
a radical Islamic insurrection in 2000). Russia is planning to buy
run-down industrial assets in Kyrgyzstan, to help revive the
republic's economy, and stabilize the situation there.

Ukrainian RelationsReports from Moscow tell us that President Putin supported the
nomination of former Prime Minister Viktor Chernomyrdin as
Ambassador to Ukraine and the presidential Special Representative
for Economic Cooperation in Ukraine as a KGB-style "special
operation." Chernomyrdin, who closely cooperated with Ukraine's
President Leonid Kuchma when both served as prime ministers, is
Kuchma's personal friend. Nevertheless, Chernomyrdin will take
direction from the Kremlin and work hard to recover the $2 billion
debt Ukraine still owes Russia for energy supplies.

It is clear that Putin is stepping up pressure on Ukraine. His
administration pressured Kuchma to fire Ukraine's pro-Western
Foreign Minister Borys Tarasyuk (fall 2000) and Prime Minister
Victor Yushchenko (May 2001). The new Prime Minister Anatolii Kinakh is viewed as
loyal to Kuchma. Kuchma will nominate state secretaries to his
cabinet and individual ministries who also will do his bidding, and
who will not be subject to the authority of the Rada (Parliament).
Kuchma is effectively circumventing the Rada, which is dominated by
the oligarchs. Thus, unlike the Prime Minister, they cannot be
fired by the Rada.

In January 2001, Moscow and Kyiv reportedly
signed a 52-clause classified military agreement giving Russia
considerable influence over Ukrainian military planning.
Reportedly, this agreement entails establishing a joint Black Sea
naval force. We cannot confirm the accuracy of these reports. The
Ukrainian embassy in Washington denies them, although reliable
sources assured us that indeed some such documents have been signed
and that Ukraine is under pressure to re-align itself more closely
with Russia. If true, these agreements may place Ukraine's
cooperation with NATO in the Partnership for Peace framework in
doubt and jeopardize the joint naval exercises that Ukraine and
NATO have held during the last three years.

On the economic front, Russian
companies are on a buying spree to gain control over the electric
grids, oil and gas pipelines, and aluminum refineries, which will
economically further link Ukraine to Russia. Russian companies are
spending hundreds of millions of U.S. dollars to acquire these
assets. However, the Ukrainian infrastructure is in such as poor
condition that it will require Western investment, equity
participation and management skills to attain viability.

Moscow is interested in boosting
cooperation between the Russian and Ukrainian military-industrial
complexes. Important technological facilities in aviation and
rocketry were left in Ukraine when the USSR collapsed. That could
boost Russia's production and export capacities. These assets
include the largest heavy ICBM factory in the world (Yuzhmash), the
Antonov heavy transport aircraft design bureau and plant, and the
Nikolayev shipbuilding yards. Russia may use this industrial
capacity to further develop its military exports to China, India,
and the Middle East.

U.S. policymakers need to be aware that the
Ukrainian military and national security establishment suffers from
split loyalties. The Ukrainian armed forces include many ethnic
Russians who worked for the Soviet military or the KGB, and who may
see Russia as a successor to the Soviet State. Ethnic Ukrainians
are more committed to the cause of an independent Ukraine and often
suspicious of Moscow's intentions. Any activities that boost
Ukraine's sovereignty and independence may enjoy more support from
ethnic Ukrainians than from the ethnic Russians in Ukraine's armed
forces.

NATO is an important partner in building
Ukraine's military and security potential as a counterbalance to
Russia. Ukrainian military leaders do not want to cooperate
exclusively with Russia. They should be encouraged to capitalize on
the Partnership for Peace, and to enter cooperative ventures with
NATO as a group, and bilaterally with its members. It is extremely
important that the next generation of Ukrainian military officers
and security officials receive their education in the West, and
that they are not denied promotions or pushed out of service upon
their return to Ukraine.

Pillar #2: Develop the European Union as
a major energy market and principal source of technology and
foreign investment
In addition to the economic benefits, Putin sees closer European
ties as valuable in enhancing his leverage with the United States.
He has no illusions that NATO will abandon the U.S. over critical
issues like BMD merely because Russia objects. However, at the same
time, he believes that European qualms about BMD give him influence
and leverage that he can exploit not only in talks with the
Americans but in dealings with the Europeans.

The economic incentive is critically
important. Leaders of the Russian business community who are
already involved in energy exports and have floated ADRs in the US
believe that Russia's future lies in exports to the West
(particularly Europe) and in raising Western capital. They say they
reject neo-Soviet or anti-Western positions and are willing to play
a more prominent role to move Russia towards closer integration
with the West. They also claim that they are capable of working
with Duma deputies and Kremlin staff to facilitate a more
pro-Western position. They suggest developing channels to work more
closely with the Russian business community.

This means that this politically influential
community will encourage Putin's outreach to the European Union.
Again, there is a domestic and economic interest driving foreign
policy in this area. Given the strong political, economic and
business interests of Europeans-particularly in Germany-to
cooperate with Russia, we can expect closer ties in the future.

Pillar #3: Develop China, India and Iran
as an arms marketRussians have strong but ambivalent views about these
countries. Some Russians dream of bringing these countries into a
coalition to counterbalance the United States. Those who espouse
this "Eurasian" position (such as Alexander Dugin, the chief
ideologist of Eurasianism) see Russia as the nucleus of the future
anti-American bloc in the Eastern Hemisphere. They are strong
supporters of Putin, who some Russian analysts believe supports
this "Eurasian" orientation. However, we think that Putin's main
motivation is less ideological and more economic and geopolitical.
In short, he is looking for cash and for ways to maximize his
international leverage, which the special relationships with these
three countries provide.

The most interesting relationship is with
China. Russians are profoundly ambivalent about China. Russia and
China will sign a Treaty on Friendship and Cooperation during
Chairman Zhiang Zemin's visit to Russia in July. Nevertheless,
almost all of our Russian interlocutors expressed concern about the
growing economic and military power of China and claimed that they
see limits to Russian-Chinese cooperation. Russian experts on China
are particularly adamant: they claim that the Chinese view Russia
with disdain, and that historic claims of injustice in the
relationships may lead to territorial claims in the future. The
Russians were particularly indignant about China's refusal to
include in the treaty an explicit clause about the finality of
borders. They dislike the "extra-territorial" villages populated by
Chinese on Russian soil, and they protest Chinese embassy officials
coordinating the activities of Chinese businessmen.

Pillar #4: Develop a pragmatic
relationship with the United States that maximizes the perception
of Russia's great power statusPutin's attitude toward the United States is unlike that of
Boris Yelstin, who adhered emotionally to the hope of a close
relationship with the United States. Putin has no such emotions or
expectations.

Putin's foreign policy is like a
Russian form of Gaullism-ever seeking independent actions to
maximize his ability to maneuver and keep opponents from coalescing
against him. This means that Putin is neither pro-American nor
anti-American. He will act on his perception of national interest,
which is rather narrowly (and sometimes contradictorily) defined.
Hence, he will sell arms even though it angers the U.S. Yet he may
be open to cooperation with the U.S. on counter-terrorism,
particularly against radical Islamic groups. He will cooperate with
China militarily because he wants their money for arms and because
he wants a counterbalance to the U.S. Yet, he may be open to the
suggestion of a Russian-Western cooperation against China if he
were given sufficient financial and geopolitical incentives (most
of which we would not be willing to give).

His global strategy appears to be to develop
a multipolar set of relations with China, Middle Eastern states and
the European Union to maximize Russia's international influence,
prestige and leverage-not to mention its finances (which explains
Russia's role in proliferation and its relations with some rogue
states). Very often this will put Russia at odds with the United
States. Moreover, there is a strong psychological desire to
preserve the perception of Russia as a great power. Hence the need
to appear independent from and equal to the United States,
particularly in strategic matters.